Revenues of Bayer (BAYRY) during the fourth quarter declined marginally by 0.6% to €7.87 billion from €7.92 billion in the corresponding period last year. For 2009, revenues came in at €31.16 billion, down 5.3% from €32.91 billion in 2008.
Bayer’s core earnings per share (EPS) came in at €0.90 (approx $1.23) compared to €0.71 (approx. $0.96) in the year-ago period. The Zacks Consensus Estimate during the reported quarter was $1.14. For 2009, the company recorded a 12.7% decline in core EPS to €3.64 (approx $4.96). 2009 earnings were lower due to €766 million of charges associated with certain restructuring measures and litigation. However, the company does not expect to incur these charges in 2010.
The three major segments: Healthcare, CropScience and MaterialScience accounted for 53%, 18% and 26%, respectively of total revenues during the reported quarter. Healthcare and CropScience segment revenues improved by 0.6% and 3.4%, respectively.
The Healthcare segment recorded revenues of €4.16 billion compared to €4.14 billion in the corresponding period last year. Both the divisions of Healthcare – pharmaceuticals and consumer health were almost unchanged from the previous quarter. During 2009, this segment generated a 3.8% rise in revenues to $15.98 billion.
Bayer’s primary market, Europe – accounting for 40% of its Healthcare revenues in 2009 remained almost unchanged compared to 2008. The other markets of North America, Asia-Pacific and Latin America/Africa/Middle East grew 2.7%, 17.5% and 4.2%, respectively.
Revenues from CropScience increased 3.4% to €1.4 billion during the quarter on higher volume although prices came down by 3.6%. New product sales increased 5.2% to €426 million representing 30% of the total portfolio.
Revenues from Crop Protection (division of CropScience) increased 4.7% to €1.17 billion. However, sales of Environmental Science/BioScience dropped 3.1% to €221 million.
Material Science recorded revenues of €2.02 billion, down 1.9% from the year-ago period due to a 17.6% decline in price of the products, but were offset by higher volume.
Although gross cash flow for 2009 declined 12% to €4.6 billion, net cash flow rose 49% to €5.4 billion because of improvements in working capital. The company reduced its net debt to €9.7 billion at the end of the year from €14.2 billion at the end of 2008. However, in 2009, Bayer’s earnings before interest, tax, depreciation and amortization (EBITDA) before special items declined 6.6% to €6.47 billion against its guidance of a 5% fall.
Bayer expects to post more than 5% currency and portfolio adjusted sales growth for 2010 with EBITDA before special items rising towards €7 billion. Core EPS is expected to improve by 10%. We believe growth in the Healthcare business is particularly important for Bayer as it has shifted focus to this area, which accounts for more than 50% of total revenues. We expect the MaterialScience business to pick up in 2010 when the world economy recovers from the current recession.
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